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If only George understood numbers

Of the poorest 10% of households, almost half now have more debts than assets.

That’s just so ludicrously stupid as an observation. Not only is it wrong – when measuring poorest by wealth it’s about all of the bottom 30% of households who have more debt than assets – it’s also entirely and wholly normal. Simply because we live in a society where it is possible to gain access to credit. Therefore those at the bottom of the asset pile will be those with more credit than assets.

This is also why when you compile a listing of the poorest – again by wealth, not income – globally the vast majority of those at the bottom are middle classish people in the rich nations. Students fresh out of university with their loan books.

No, really. Come out of Harvard with a Masters in summat and you might have $400k in debt. There’s no way some landless peasant in India is ever going to be lent that much. The landless peasant also looks forward to $2 a day for the rest of his life, that Harvard grad might be walking into a $100k a year job. But, by wealth, for this year and a couple, the Harvard grad is poorer, by wealth, than the man with nothing. That’s just how these numbers work.

None of this is accidental. Neoliberalism is sold to us as a means of enhancing freedom and choice, but in reality it’s about power. It shifts tax and regulation from those who are rich and powerful on to people who are poor and weak. The taxes the wealthy once paid have been transferred to those with far smaller resources.

That also doesn’t work. Because the tax burden these days is higher than it used to be. More of GDP, more of everything, is washed through taxes and government. Which is why the tax burden has reached down to the poorer – the rich are already plucked to the limit of the ability to do so therefore others must also be taken in order to pay for politics.

This is also untrue:

Neoliberalism promised that it would generate growth. The benefits of this growth would trickle from the rich to the poor, enhancing everyone’s conditions of life. But growth, for better or worse, has been slower globally during the neoliberal era than during the years before Thatcher, Reagan and their many imitators came to power. And it has been overwhelmingly captured by the very rich. Far from ensuring that money trickles down, neoliberalism is the pump that shifts wealth from the poor to the rich.

It’s tosh in fact.

Global inequality has been falling this past 40 years. Global poverty has not just been falling this past 40 years, it’s the greatest fall in absolute poverty in the entire history of our species.

It is true that the people who have bourne the brunt of this are the below median in rich countries. That roughly 80 to 90 % of the global income distribution.

But think on this for a moment. If you said to Geroge that we shouldn’t do something because the people who would stand still – become relatively less well off, even if they remain where they are in absolute terms – were those at the 80 to 90th percentile of the domestic income distribution then he’d shout “Fuck ‘Em” wouldn’t he? This policy will hit those earning – household income – say £60k to £120k (roughly, -ish, about right) the answer would be “Great!”.

Why isn’t this equally justifiable on the global numbers?

Even this definition is wrong:

Why? Because the doctrine destroying our condition of life is the doctrine Liz Truss has promised to extend to new extremes. She is fanatically devoted to an ideology misleadingly called Thatcherism or Reaganism (as if they invented it), but more accurately described as neoliberalism.

This doctrine insists that politics submits to “the market”, which means, when translated, that democracy must submit to the power of money. Any impediment to the accumulation of wealth – such as public ownership, tax, regulation, trade unions and political protest – should be torn down, either quickly and noisily or slowly and stealthily. When consumer choice is unencumbered by political interference, the market is allowed to become a Great Winnower, sifting us into a natural hierarchy of winners and losers.

The doctrine has religious, quasi-Calvinist aspects: in the kingdom of the market we can see who is deserving and who is undeserving through the grace bestowed upon them by the god of money. Any policy or protest that seeks to disrupt the formation of a natural order of rich and poor is an unwarranted stay upon the divine will of the invisible hand.

Describing me as a High Priest of neoliberalism would be a bit much – I’m not important enough for that. But I am a Senior Fellow at a think tank that proudly describes itself as neoliberal. Rather than issuing full blooded Hosannas my role might be issuing the occasional “,” in the hymnal text. But within that Church of Neoliberalism markets are simply a tool. They’re a tool that works well in doing some things, needs adjustment to work well in others and don’t work at all in a third group. A total free market in intellectual property – or other public goods because of their non-rivalrous, non-excludable nature – doesn’t work. In the sense of not producing what we out here, we peeps, desire.

The only difference between us and the most rigid statist, planner or scientific socialist – short of the Kim Young Un sorta level – is in allocating problems to those efficiently dealt with by markets, those requiring alterations and those that have to be addressed by other means.

Markets are simply a tool that works well at times and not at others. The trick is in working out which is which. This is why neoliberals are not anarcho capitalists.

Us neoliberals – and as that junior deacon in the cathedral I do know this – are simply observing what it is that humans desire. More. More lifespan, more food, more choices, a better longer life by the standards of those people doing the desiring. This includes more forests, more swamps (to limited extents perhaps, but more still) and more sunsets to gawp at. Humans are complex, with multiple desires. We then note that in much of life, but not all, market mechanisms produce what is desired. And really, that’s it.

Markets are often enough a useful tool to produce what humans desire. Thus we should use markets where they are just that, and not where they ain’t. That’s it, that’s neoliberalism.

And do note something that could be relevant. Judging by those results of that past 40 years in those charts above, neoliberalism works too. Ain’t that fun?

21 thoughts on “If only George understood numbers”

  1. The article is full of language to whip up a mob. Fanatic, extreme, Thatcherism, misleading, power, and “The god of money” are all used to create prejudice and eliminate the possibility of rationale debate.

    We can’t win over people one by one with analysis as demagogs like Moonbat will win. And humanity will be the poorer for it. The left, literally, don’t care for facts. As time goes on I become more radically opposed to them, online at least.

  2. The only failure to subsidise that comes to my mind was Maggie’s failure to keep building nukes when the gas began pouring in. Had she windmill-ised building PWR’s, the UK might now have about half of its electricity generated by nukes.

    You’ll have noted the contrast to Russia where they kept building. This made sure they had plenty of surplus gas to export to Europe.

    Of course Maggie was also correct. If her common sense had prevailed, by now the whole of Britain would have been fracked!!! And the UK would now be self-sufficient in energy.

  3. Kind of amazing to see the power Thatcher still has over the minds of the left.

    I think there’s a pretty good chance that in a couple of days he’ll be writing an article about how the plebs have too much stuff and go on too many holidays. He doesn’t really give a toss about the poor.

  4. When talking about assets/debts, to what extent should people in western countries be considered as holding wealth to the tune of the expected present value of eg their future income stream from their government pension? We’d count private pension assets as wealth. And what else ought to count – the right to free health care is in the literal sense a valuable asset (if you had to buy an NHS card to access free treatment for life, most middle-income people would be prepared to spend many thousands of pounds on it) and so is the expected present value of future benefits payments in case of unemployment or disability. What about right to free education up to secondary school or FE college diploma level?

    At some point you have to concede a just-getting-by westerner with a small bank overdraft and X grand of credit card debt, whose main asset is a £500 second-hand car, is “poorer” in the wealth sense than a landless Indian farmer on poverty wages with no access to credit… Once X gets big enough that’s indisputable. But since the westerner would be less keen than the Indian to swap places, it’s surely worth thinking what other assets haven’t been included in the calculation.

  5. I ended up almost in a shouting argument with another engineer when I commented: If they could work out how to combine carbon capture with fracking, use the CO2 as the liberating agent, they’d solve two problems at once.
    * NO! That’s not how it works, they use formaldehyde!
    * Yes, they do now, but if they could combine…
    * NO! That’s not how it works!
    * Yes, you’re right, that’s not how, present tense, it works now, present tense, but if, future tense, they could combine both, future tense, then, future tense, they could solve two problems, future tense, together.

    The two of us, both electrical engineers.

  6. Err, yes, thank you for that. Given that I’ve been one of the very few making this argument for some years now…..

  7. “This doctrine insists that politics submits to “the market”, which means, when translated, that democracy must submit to the power of money.”

    Or, put another way, that political power should defer to the democracy of a free market. Didn’t even the Dark Lord Keynes himself say something along the lines that you can give a man no more powerful a vote than the pound in his pocket?

    Sometimes I think that these smartarses actually believe it would be “democratic” for some Whitehall bureacrat to decide what everyone’s having for dinner tonight.

  8. Jgh…. It’s entirely possible to capture carbon directly into formaldehyde…
    It just takes lots and lots of lightning… 😉

  9. @Tim

    “Err, yes, thank you for that. Given that I’ve been one of the very few making this argument for some years now…..”

    Assuming that was addressed to me… I know I’ve seen you argue the point about including the value of the state pension as an asset, is it widely accepted, at least theoretically? I mean it looks a pretty solid argument to my eyes. But was curious whether you’d go so far as to include the expected present value of other government benefits (e.g. every healthy young adult citizen in the UK has basically lucked out on a pretty decent insurance policy for life in terms of health care and disability benefit) or does the fact you can’t sell it or borrow against it mean that’s going too far? (Similarly, should the Harvard grad be considered to have a human capital asset, assuming they did a degree that puts them on track for the $100k+ career? Or is that counting the chickens too early?)

  10. Shortly after I bought my first flat their prices fell a bit. For the only time in my life I had a bank loan (taken on to buy a car – the only new car I’ve ever bought). So it’s possible that briefly I had negative assets. But the truth is I’ve never felt poor in my life. Lucky me.

    I suppose some people would have the effrontery to say they’d feel poor if they couldn’t flash out on a new car every two or three years. More fool them.

  11. Anon
    September 17, 2022 at 10:59 am

    When talking about assets/debts, to what extent should people in western countries be considered as holding wealt

    Add in things like the quality of our government institutions (while bad are still better than most other nations and allow us a life reasonably free of fear of violence or property crime), universal basic education, infrastructure, etc.

    All stuff that make being poor in the US/UK better than being ‘middle-class’ in a lot of other countries.

  12. Cheers Tim. The “where do we stop” bit is basically what I’m asking, but it’s hard to disagree with your point that we surely shouldn’t stop before we’ve taken into account the effect of government efforts to smooth out the wealth distribution.

    This is made entirely clear in the usual source document for proof of that wealth inequality, Saez and Zucman (4). To quote at length:

    “Our definition of wealth includes all pension wealth—whether held on individual retirement accounts, or through pension funds and life insurance companies—with the exception of Social Security and unfunded defined benefit pensions. Although Social Security matters for saving decisions, the same is true for all promises of future government transfers. Including Social Security in wealth would thus call for including the present value of future Medicare benefits, future government education spending for one’s children, etc., net of future taxes. It is not clear where to stop, and such computations are inherently fragile because of the lack of observable market prices for this type of assets. Unfunded defined benefit pensions are promises of future payments which are not backed by actual wealth. The vast majority (94% in 2013) of unfunded pension entitlements are for Federal, State and local government employees, thus are conceptually similar to promises of future government transfers, and just like those are better excluded from wealth.”

    Everything government does which changes the current wealth distribution is specifically excluded from
    our estimation of the wealth distribution. This is obviously not a useful measure of that distribution for policy making purposes. Our task is to try to decide whether more needs to be done to change that
    distribution. An observation of what it would be without what is already done isn’t the right starting point for that deliberation. This has been called “Worstall’s Fallacy” (not, I hasten to add, originally called that by me but so named because I make the point so often): To propose what must be done before considering what is already done to solve the problem.

    Bit surprised you didn’t use the chance to hammer home the issue that a lot of wealth inequality is just the natural fact that people accumulate assets as they age, so older people are richer than younger people, plus the regional variation that’s led to some people doing very well out of property prices and less so for others. Incidentally, anyone know how much the wealth distribution has been skewed over time due to the ageing population – has this made wealth inequality noticeably worse?

  13. What if the more you know, the less you need?

    Why should I believe you when you say some things should not be left to markets, yet are disturbingly unsurprised that markets happily assumed buying and selling humans was good state policy?

    Why should animals be enslaved today? Because, markets?

  14. He doesn’t really give a toss about the poor.

    Moonbat has never met a poor person. He went to Stowe, then Brasenose, and then got a ‘job’ at the Guardian. His idea of a poor person is somebody who can only afford one holiday a year in Klosters.

  15. I can’t remember where I read it long ago, but there’s a theoretical example of a state named Egalitaria. All Egalitarians are educated until the age of 20, at which point they are paired off and 50% are selected at random to stay at home for 20 years and look after the compulsory two children, while the other half start work straight away, and (of course) everybody in Egalitaria is paid the same wage of $1,000 pa. They have nothing to spend it on, since the state provides all their necessities, so they can only invest it with the state bank, paying 5% interest. They all continue working until age 80, when all Egalitarians die and the state takes back their savings with 100% inheritance tax.

    If you do the sums, the 10% of wealthiest Egalitarians (those aged 65-80 who didn’t take time off for childcare) own 50% of all the wealth. it’s an outrage!

  16. Future pension payments are indeed wealth, but are not measureable due to the effect warned of by Sir John Cowperthwaite (about GDP) – that if you try to measure it, this allows people to do things with it which make the measurement meaningless.

    Plus, of course, state pensions are at the whim of the current government and can be withdrawn at any time.

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